When someone like Harvard professor Michael Porter (above) says “Billions are wasted on poor philanthropy”, you know there’s a problem.
He goes on: “Philanthropy is decades behind business in applying rigorous thinking to the use of money.”
What’s more, billionaires spend an average of $180m over their lifetime on causes they care about , according to research group Wealth-X. So this is a big deal. And at the very least you need to do your due diligence. Or you’ll fritter away a fortune on a grand scale and achieve none of the goals you set yourself.
Author and donor Eric Friedman puts it more bluntly: “Philanthropy is broken,” he says, “and almost everyone involved knows it.” He’s talking about the impossibility of measuring the impact of impact investing.
Some would say expecting to put a financial ROI on philanthropy is flawed from the start. There are others who say we shouldn’t expect a return from philanthropy. But shouldn’t your goal be to make the best use of your funds? Not simply to throw them away? Let that pass for now.
Why should someone successful need help to build a legacy?
When you talk to successful men and women about philanthropy and legacy building, the feedback you get is stark.
“Because I have made money does not mean I am good at giving it away – it is a completely different skill,” says one ultra high net worth individual.
Another says: “There is a lack of obvious places to turn to for independent bespoke advice.”
Many philanthropists feel that their existing wealth management providers – their private bankers and their lawyers, smart though they are – can’t support their needs.
“They cannot tell you if a philanthropy project will provide you with value for money,” reports one foundation owner. This from someone with a long-time relationship with their financier.
“And they are not interested in the psychic income,” says another. It’s an important and often misunderstood point. There IS a personal psychological reward from building something that matters. How can an auditor or solicitor help you make the right choice there? That’s well outside their experience.
Catherine Letts of the Kennedy School of Government at Harvard is critical of the wealth advisory community in this respect. “The many industries that serve the affluent (lawyers, accountants, investment advisers),” she says, “are not very well equipped to help people navigate and integrate the issues associated with [legacy building].”
In the very final paragraph of his book Beyond Success, the author Randall Ottinger gives this verdict:
“A missing element [in the wealth advisory industry] is an integrated process that helps individuals clarify their goals and brings together what today are fragmented services. When this is done effectively, wealth advisory firms will become legacy advisory firms and their offerings will become blended value offerings.”
Why should someone who’s already active as a philanthropist need help?
When experienced legacy builders reflect honestly on their work to change the world, many of them don’t feel their existing projects are as sophisticated as they could be. The projects aren’t making the impact they imagined. They’re not as large scale as they planned. And – perhaps most important of all –philanthropists are struggling to make them sustainable and enduring. Just throwing more money at the problem is possible, but it’s not the answer.
In fact, it’s the legacy builders undertaking the most ambitious projects who are often the most disappointed. Why? Because they’re doing it without thorough business and strategic planning .
“Disappointments are the results of poor or rash planning and weak understanding of the project,” says one multimillionaire philanthropist. And, looking back, it’s the initial and start-up phases of projects that are “continually deemed the most challenging phases”.
Also problematic is decision making and monitoring the ongoing impact “especially because of the lack of objective data”.
Why should someone successful at executing a business vision now need help executing the vision for their legacy?
Despite their experience and success at executing their business visions, most entrepreneur-philanthropists don’t know precisely how to implement the vision for their legacy.
It’s not that they don’t have a vision – far from it. But researchers in one survey report disappointed philanthropists as saying “it’s difficult to identify how we could best implement their vision”. And “more people would do it if they knew exactly HOW to do it”. Because how to start along the path of their individual journey “is a fundamental challenge” and a major gap at the start of the legacy-building process.
For those at the start of the journey the value is clear. Because new philanthropists and legacy builders are looking to explore what is possible as well as how their legacy can be realized.
The researchers conclude their report suggesting that ongoing advisory support from legacy-building experts in the field would be beneficial. Indeed researchers compiling another survey report that “there is a lot of capital locked up right now because people just don’t know how to do this”.
Philanthropists who have grappled with legacy building are very clear: “The first dollars should be spent on information and advice.”
Why should someone work with their peers? And why work face-to-face? (Isn’t that a waste of time?)
Most philanthropists who’ve tackled legacy building express a preference for face-to-face and bespoke feedback . And from peers as well as advisers. “More of these conversations would be helpful.” Indeed, ultra high net worth individuals view their peers as the most trusted information source, above consultants and other researchers.
So why? Why do experienced philanthropists and legacy builders have a strong preference for personalized advice and seem to benefit from bespoke and customized support, not off the shelf information, which surely is quicker? “Advice is bespoke, more time efficient and allows us to retain control of the process,” says one multimillionaire legacy builder.
Partly this is about mitigating risk. Given the investment you will make in your legacy over your lifetime, you can mitigate the risk to your legacy by networking with peers who are doing it alongside you and by getting insights from those who’ve done it before you.
There are two more things you need, though. First, if you are going to hire professionals make sure they have relevant experience of legacy building. And secondly you must take a more hands-on role. This is about doing not donating.
How much will legacy builders invest in their legacy in their lifetime?
Billionaires will spend an average of $180m on philanthropy in their lifetime . You may not be a billionaire, but to calculate your lifetime investment in your legacy, just look back at the amount you’ve invested in philanthropy so far. Now ask yourself how many years till you’re, say, 75 and do the maths. That will be your lifetime investment in your legacy.
Why should entrepreneurs or owners move away from donating to causes they support and building a legacy instead?
Perhaps you want to move away from what the Pears Foundation calls armchair philanthropy . Just making a difference with your cheque book rather than investing yourself in a project.
Perhaps you want to take charge of your legacy building and move away from reactive crisis-to-crisis donations. You certainly want to do something in your lifetime and not wait to leave a bequest until you die. (What London Business School guru Charles Handy calls new philanthropy rather than post-mortem philanthropy.)
The Brookings Institute calls this activist philanthropy. Michael Porter calls it catalytic philanthropy. But whatever you call it, you should be thinking about taking active charge of your legacy. Because of the kind of person you are.
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